Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2017 Earnings Presentation
33 slides from Qbe Insurance's earnings presentation, Aug 17, 2017
Slide 1: ASX cover letter for QBE results presentation
QBE Insurance Group Limited ABN 28 008 485 014 Level 27, 8 Chifley Square, SYDNEY NSW 2000 Australia GPO Box 82, Sydney NSW 2001 telephone + 612 9375 4444 « facsimile + 612 9231 6104 www.qbe.com 17 August 2017 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge Stre
Slide 2: QBE Insurance Group 2017 half year results presentation
For personal use only QBE Insurance Group 2017 half year results presentation John Neal • Group Chief Executive Officer Pat Regan • Group Chief Financial Officer Thursday 17 August 2017 All figures in US$ unless otherwise stated
Slide 3: John Neal, Group Chief Executive Officer
For personal use only John Neal Group Chief Executive Officer 2 •
Slide 4: 1H17 Results Snapshot
1H17 RESULTS SNAPSHOT For personal use only GWP NEP CLAIMS RATIO4 EXPENSE RATIO +3% growth1 +6% growth1 $7,892M2 $8,044M2 $5,791M3 $6,045M 61.3%3 63.1%5 16.1%3 15.2% 1H16 1H17 1H16 1H17 1H16 1H17 1H16 1H17 COR4 CAY COR6 INSURANCE MARGIN ROE 94.5%3 95.3%5 5.6%3 9.3%5 5.1% 8.8%5 97.9%3 97.1% 1H16 1H17
Slide 5: 1H17 Update
1H17 UPDATE For personal use only • 95.3% combined operating ratio1,2 (1H16 94.5%)2,3 UNDERWRITING • 9.3% insurance profit margin1 (1H16 5.6%)3 PERFORMANCE • Sixth consecutive half of positive prior accident year development • ROE 8.8%1 (1H16 5.1%)`3 • Emerging Markets disappointed with COR of 110.8
Slide 6: 1H17 Divisional Results
1H17 DIVISIONAL RESULTS For personal use only Australia & North New Emerging 1H17 America Europe1 Zealand Markets Equator Re Group1,2 GWP ($M) 2,803 2,393 2,007 857 1,375 8,044 GEP ($M) 2,187 1,915 2,024 804 798 6,909 NEP ($M) 1,712 1,532 1,705 679 419 6,045 Net claims ratio (%) 66.8 53.3 63.6 64.9
Slide 7: Emerging Markets: Impacted by Higher Frequency of Mid-Sized Claims
EMERGING MARKETS: IMPACTED BY HIGHER FREQUENCY OF MID-SIZED CLAIMS ACROSS SEVERAL PORTFOLIOS For personal use only COMBINED OPERATING RATIO1 VS PRIOR YEAR 0.8% 0.3% 110.8% 4.0% Despite the completion of the sale of Chile, flooding prior to sale 2 closure contributed to 5.0% the loss 1 < Asia Pacific
Slide 8: Comprehensive Program of Remedial Actions in Asia Pacific & Latin America
COMPREHENSIVE PROGRAM OF REMEDIAL ACTIONS UNDERWAY IN ASIA PACIFIC & LATIN AMERICA For personal use only ASIA LATIN PEOPLE & MAJOR TRADING PACIFIC AMERICA ORGANISATION PARTNERS • Revised pricing • Significant reduction in • Revert to two division models for property, acquisition costs structure to e
Slide 9: Key Performance Drivers
KEY PERFORMANCE DRIVERS For personal use only 3% CONSTANT CURRENCY GWP GROWTH POSITIVE PRIOR ACCIDENT YEAR DEVELOPMENT 22 91 PoA stable at 89.5% 1.9% Average PYD 11 over the 6 halves 105 (77) 8,044 7,892 $132M $69M $196M $145M $107M $63M 1H161 FX/Other NA2 EO ANZO EM 1H171 2H14 1H15 2H15 1H16 2H16 1
Slide 10: Pat Regan, Group Chief Financial Officer
For personal use only Pat Regan Group Chief Financial Officer 9 •
Slide 11: 1H17 Financial Results Summary
1H17 FINANCIAL RESULTS SUMMARY For personal use only For the half year ended 30 June 1H161,2 1H171,3 Change GWP $M 7,892 8,044 3%4 NEP $M 5,791 6,045 6%4 COR % 99.1 94.9 4.2ppt COR (ex discount rate) % 94.5 95.3 0.8ppt Insurance profit $M 324 562 73% Insurance profit to NEP % 5.6 9.3 3.7ppt Net prof
Slide 12: Australia & New Zealand – Remediation Momentum Continues to Improve Profitability
AUSTRALIA & NEW ZEALAND – REMEDIATION MOMENTUM CONTINUES TO IMPROVE PROFITABILITY For personal use only RATE MOMENTUM CONTINUES; RETENTION STABLE IMPROVEMENT IN ATTRITIONAL RATIO CLAIMS(EX RATIO LMI) 8.0% -4.2% 83.4% 83.1% 83.4% 6.0% 81.8% -3.3% 4.0% 85.8% 83.4% 1.7% 5.2% 2.0% 65.2% 58.7% 61.0% 62.0
Slide 13: Investment Performance
INVESTMENT PERFORMANCE For personal use only FIXED INCOME DURATION (YEARS) QBE PORTFOLIO RETURN VS MARKET1 Market return QBE return 1.83 1.54 1.42 1.29 1.00 0.89 0.9 1.5 1.6 1.38 1.49 0.44 1.25 0.28 1.08 FY15 FY16 1H17 2H14 1H15 2H15 1H16 2H16 1H17 1. Asset weighted aggregation of all underlying ass
Slide 14: Financial Strength
FINANCIAL STRENGTH For personal use only S&P CAPITAL CAPITAL 1H17 APRA PCA: 1.7x S&P maintain “positive” outlook CASH REMITTANCES DIVIDEND & SHARE BUYBACK 2017 interim dividend up 5% to 22 Australian cents per share 61% of cash profit, 30% franked $413M $379M $201M $648M $653M Share buyback active i
Slide 15: Outlook
For personal use only Outlook John Neal Group Chief Executive Officer 14 •
Slide 16: Key Priorities for 2H17
KEY PRIORITIES FOR 2H17 For personal use only • Maintain underlying improvement in ANZO PERFORMANCE • Execute on profit improvement plans in North America IMPROVEMENT • Maintain underwriting discipline in challenging European markets • Implement Asia Pacific underwriting remediation ASIA PACIFIC & •
Slide 17: Questions & answers
For personal use only Questions & answers 16 •
Slide 18: Disclaimer
DISCLAIMER For personal use only The information in this presentation provides an overview of the results for the half year ended 30 June 2017. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those l
Slide 19: Appendices
For personal use only 18 • Appendices
Slide 20: 1H17 Attritional Claims Ratio Analysis
1H17 ATTRITIONAL CLAIMS RATIO ANALYSIS For personal use only 1H16 1H17 NEP Attritional NEP Attritional US$M % US$M % Rest of world 5,484 51.1 5,672 51.5 Crop insurance 307 83.1 373 80.6 QBE Group adjusted 5,791 52.8 6,045 53.3 19
Slide 21: 1H17 Claims Ratio Analysis
1H17 CLAIMS RATIO ANALYSIS For personal use only 30 June 2016 30 June 2017 Statutory 1Adjusted Statutory 2Adjusted NEP $M 5,615 5,791 6,043 6,045 Attritional claims % 54.5 52.8 53.3 53.3 Large individual risk and catastrophes % 9.8 9.5 9.7 9.7 Claims settlement costs % 3.0 2.9 3.1 3.0 Claims discoun
Slide 22: Currency Mix
CURRENCY MIX For personal use only Currency mix of interest bearing financial assets 30 JUNE 2017 31 DECEMBER 2016 US$M % US$M % Australian dollar 7,043 27 7,993 32 US dollar 8,320 32 7,786 31 Sterling 4,819 19 4,473 17 Euro 2,473 10 2,104 8 Canadian dollar 1,025 4 941 4 Hong Kong dollar 484 2 497 2
Slide 23: 1H17 Movement in Weighted Average Discount Rate
1H17 MOVEMENT IN WEIGHTED AVERAGE DISCOUNT RATE For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 30 June 2016 31 Dec 2016 30 June 2017 Australian dollar 1.77 2.26 2.17 US dollar 1.20 2.04 2.05 Sterling 0.56 0.68 0.80 Euro (0.16) 0.19 0.46 Group weighte
Slide 24: FX Rates versus US$
FX RATES VERSUS US$ For personal use only June 2016 December 2016 June 2017 2017 assumed Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.75 0.73 0.72 0.74 0.77 0.75 0.75 GBP 1.33 1.43 1.23 1.35 1.30 1.26 1.26 EUR 1.11 1.12 1.05 1.11 1.14 1.08 1.08 ARS
Slide 25: North America
NORTH AMERICA For personal use only 1H16 1H17 • Premium rates up 1% Gross written premium $M 2,818 2,803 • Current accident year underwriting profitability stable • Return to top-line growth with underlying GWP up 4%1 Gross earned premium $M 2,184 2,187 • Continued growth trajectory in Specialty, wi
Slide 26: Europe
EUROPE For personal use only 1H161 1H172 • Overall premium rates down 1%, reflecting a slight improvement from 1H16 Gross written premium $M 2,508 2,393 • Modest GWP growth on a constant currency basis Gross earned premium $M 1,930 1,915 • Targeted growth achieved in Continental Europe insurance por
Slide 27: Australia & New Zealand
AUSTRALIA & NEW ZEALAND For personal use only 1H16 1H17 Gross written premium $M 1,861 2,007 • GWP grew 5% on a constant currency basis reflecting 5% premium rate increases on the back of further rate increases in short-tail personal and Gross earned premium $M 1,871 2,024 commercial lines, coupled
Slide 28: Emerging Markets
EMERGING MARKETS For personal use only 1H16 1H17 • The result significantly impacted by adverse claims experience across a number of portfolios in Latin Gross written premium $M 850 857 America and Asia Pacific • Deterioration in COR to 110.8% from 99.5% due to Gross earned premium $M 793 804 increa
Slide 29: Equator Re
EQUATOR RE For personal use only 1H16 1H17 • GWP up 22% driven by an increase in proportional Gross written premium $M 1,125 1,375 business underwritten to the divisions • NEP up 113% from the prior period, largely from growth Gross earned premium $M 583 798 in the proportional book and new bespoke
Slide 30: Financial Strength & Flexibility
FINANCIAL STRENGTH & FLEXIBILITY For personal use only As at 31 Dec 2016 30 June 2017 Summary balance sheet $M $M • Favourable PYD of $107M1 Investments and cash 25,235 25,665 Reserving • $29M favourable discount rate impact • PoA of 89.5% (FY16 89.5%) Trade and other receivables 4,831 6,926 Intangi
Slide 31: APRA PCA Calculation
APRA PCA CALCULATION For personal use only FY161 1H172 $M $M Ordinary share capital and reserves 10,334 10,716 Net surplus relating to insurance liabilities 674 726 Regulatory adjustments to Common Equity Tier 1 Capital (4,441) (4,571) Common Equity Tier 1 Capital 6,567 6,871 Additional Tier 1 Capit
Slide 32: Borrowings
BORROWINGS For personal use only Borrowings profile (%) • $3,498M at 30 June 2017 Borrowings • Weighted average cost of borrowings 5.52% Repayment profile (%) Debt to • Ratio within 25% - 35% benchmark range 64 62 equity • Debt to tangible equity down to 50.5% 31
Slide 33: QBE's 2017 Global Reinsurance Program
QBE’S 2017 GLOBAL REINSURANCE PROGRAM For personal use only 32